It’s crunch time for flats

Significant sums

However, a Law Commission Consultation Paper from July 2007 indicates that each complaint may cost £5,000 to handle. With 240,000 dissatisfied private tenants in the UK each year, significant sums may be required to finance the new system. These costs inevitably will be passed on to landlords through higher membership fees in the approved scheme. In addition, costs will rise further should a programme of regular property inspections be implemented – a prospect that was also raised in the Consultation Paper.

“In addition to these fees, the increased administrative burden and complicated regulations may also discourage buy-to-let investors”, said Lisa Barge, partner in the Real Estate Practice Group at Eversheds. “While it is important to offer tenants greater protection, these reforms may arrive at a bad time. This reform would increase costs in a falling market and dissuade investors through complicated regulations and additional administration. It may even counter-act the government’s recent measures to revive the housing market.”

As part of the reform, a central regulator would be required to act as an independent third party to oversee the regulatory framework. It would approve the professional associations and accreditation schemes that landlords would have to join and set minimum standards and rules by which they should operate. It would also oversee the enforcement of standards by the self-regulatory organisations and ensure that all landlords and agents were members of such organisations. The Consultation Paper proposes that these functions could be performed by an arm’s-length agency like the OFT.

Having read through the full 120-page report (painfully, I might add, and for many reasons) I can only express my deep disappointment with it. Not much surprise, though: the Law Commission is made up of a High Court Judge, a QC, a solicitor from a major City firm and two professors. Although the commission consulted widely (very, very widely, even, as the lengthy report shows ad nauseam) I got the impression that none of the commissioners had ever been a small landlord or possibly even met one. I also remain unconvinced of their proximity to reality on this issue.

The problem begins at the top – in this case the top of the report, whose title is: Encouraging responsible letting. Among the reams of proposed further regulation of landlords, I searched in vain for even the smallest section or sub-section headed: Encouraging responsible tenants. It seems the old mindset still prevails – all landlords are potentially wicked, heartless, irresponsible villains and the tenants are invariably the victims, in need of ever more protection.

Exploit and abuse

I saw nothing about tenants who exploit and abuse the system to remain in their rented homes – not paying the rent – not only until a court order has been obtained to remove them (which can take months, given the courts’ soft attitude on the issue) but until the bailiff is set to arrive at their door (which can add several more weeks to the process during which no rent is, of course, paid or recoverable). I saw nothing about the injustices that have driven many a good landlord out of the sector, encouraging instead the chancers and those prepared to skate close to the very thinnest section of the legal ice.

This lot of recommendations is based on some previous recent reports, whose very titles speak volumes. Take, for example, Every Tenant Matters: A review of social housing regulation by Professor Martin Cave. Right, all well and good – but doesn’t every landlord matter equally? Has it not occurred to you, good, decent and clever people, that if the burden of regulation becomes overwhelming, landlords could just walk away?

And where will all those tenants who matter so much be when the decent landlords have decided – as they are now doing increasingly – that the battle is not worth the candle and that they might as well cash in on the house price increases and sell up?

I will not waste too much breath on Shelter’s report, Fit for purpose. I totally gave up on Shelter when I challenged the right of people whose circumstances have improved and who can easily afford to rent or even buy in the private sector to continue to occupy subsidised Housing Association homes.

I thought that Shelter, on behalf of those truly in need of subsidised homes, would take up my challenge. Far from it: they insisted that a Conservative councillor in Kensington & Chelsea was fully entitled to go on occupying a subsidised flat in west London, although he himself was the owner of several properties in Greater London that he was letting out.

Readers of News on the Block may or may not know that I came very close to getting a senior housing policy advisory role in Boris Johnson’s new administration as Mayor of London. My main policy proposal would have been Build to Let, which I believe is the only way new homes are going to be built in any numbers during the next few years. One need only look at the current fortunes of yesterday’s stock market darlings, the big house builders, currently on their knees, mothballing estates and begging the government to bail them out as their stocks become worthless in the face of a dying market.

I will shed no tears for them – or for the sub-standard estate agents who will go out of business in droves. But if attitudes like the Law Commission’s deter investors from the private rented sector for fear of being landed with all the responsibilities and few rights – vis-à-vis rogue tenants – well, that would be a crying shame.